Circular No. 85-TC/ĐT provides detailed guidance on the use of foreign loans for the Bai Thuy Gas Pipeline Project - Thu Duc and the Vung Tau Gas Turbine Plant. Detailed provisions cover sources of funding, transfer of funds, interest rates, repayment terms, and responsibilities of the parties involved.
Key points
- The Ministry of Finance will provide guarantees for Petechim to borrow foreign currency from abroad for the State, transferring the borrowed funds to the Vietnam Development Bank for the project sponsors to re-borrow.
- The project sponsor shall bear the interest rate on the loan equal to the interest rate at which the Ministry of Finance borrows from abroad plus borrowing fees and domestic bank fees. The interest rate may change over time periods.
- The Ministry of Finance is responsible for repaying foreign debt (both principal and interest) when due, while the project sponsor must repay the Vietnam Development Bank on schedule.
- If the project sponsor borrows foreign funds independently to build the project according to the approved economic and technical justification, separate regulations will apply.
- The Vietnam Development Bank is responsible for collecting debts from the project sponsors to repay the borrowed capital to the Ministry of Finance.
🌐 Social impact of this document
- Positive impact: Facilitates the early operation of the Bai Thuy Gas Pipeline Project - Thu Duc and the Vung Tau Gas Turbine Plant, enhancing gas supply capacity in the region.
- Negative impact: High borrowing costs may increase final product costs, affecting business profits.
❓ Frequently asked questions
What responsibilities does the Ministry of Finance have?
The Ministry of Finance is responsible for repaying foreign debt (both principal and interest) when due.
How much must the project sponsor pay to the Vietnam Development Bank?
The project sponsor must repay both the principal and interest on the loan to the Vietnam Development Bank on schedule.
What is the interest rate on the loan?
The interest rate on the loan equals the interest rate at which the Ministry of Finance borrows from abroad plus borrowing fees and domestic bank fees. The interest rate may change over time periods.
What is the repayment period?
The repayment period starts from when the project (or part of the project) is completed and put into production and use, as specified in the loan agreement.
If the Vietnam Development Bank fails to return the received capital to the State Budget, how will they be handled?
The Vietnam Development Bank must immediately report to the Ministry of Finance, which will then report to the Prime Minister for handling.
Full text
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MINISTRY OF FINANCE ______ |
SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness ------------------------------ |
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Number: 85-TC/ĐT |
Hanoi, November 4, 1993 |
CIRCULAR
Guidelines for the use of borrowed capital for the construction of the Bai Thuy Gas Pipeline Project and the Ba Ria Gas Turbine Plant and the 220 KV transmission line from Ba Ria to Long Binh
__________________________
- Based on Decree No. 385-HĐBT dated November 7, 1991, amending and supplementing the management regulations for construction works;
- Based on Decree No. 58-CP dated August 30, 1993 issued by the Prime Minister regarding the management of foreign borrowing and repayment;
Based on Circular No. 4988/KTKH dated October 4, 1993, the decision of the Prime Minister on borrowing foreign capital for investment in the gas pipeline project and gas turbine plant;
After reaching consensus with the State Planning Commission, the State Bank of Vietnam, the Ministry of Energy, the Vietnam Oil and Gas Corporation, and the Vietnam Development Bank;
The Ministry of Finance hereby provides guidelines for the use of foreign borrowed capital for the investment in the Bai Thuy Gas Pipeline Project (the early phase bringing gas ashore) and the Ba Ria Gas Turbine Plant and the 220 KV transmission line from Ba Ria to Long Binh as follows:
I/ SOURCES OF FUNDS FOR THE PROJECTS:
- Based on the approved economic and technical justification for each project, the Ministry of Finance will guarantee Petechim's borrowing of foreign currency for the State. The Ministry of Finance will transfer the borrowed funds to the Vietnam Development Bank (selected by the Ministry of Finance and the State Bank of Vietnam) for the project sponsors to borrow again according to the spirit of Circular No. 4988-KTKH dated October 4, 1993, issued by the Prime Minister.
- The Ministry of Finance is responsible for repaying foreign debt (both principal and interest) when due.
The project sponsors are responsible for receiving and repaying the Vietnam Development Bank's loan (both principal and interest) on time so that the Vietnam Development Bank can repay the State Budget.
- The project sponsors must bear the interest rate on borrowed funds equal to the interest rate charged by the Ministry of Finance plus the borrowing fee and domestic bank fees.
The interest rate may change periodically depending on the interest rate charged by the Ministry of Finance.
- In cases where the project sponsors borrow foreign capital themselves to build projects according to the approved economic and technical justification and repay the debt themselves, separate regulations will apply.
- For domestic investment costs of the projects in Vietnamese dong, the project sponsors are responsible for using their own supplementary capital, other raised capital, and bank loans in accordance with current state regulations and banking credit rules.
II/ TRANSFER OF LOAN FUNDS FROM THE MINISTRY OF FINANCE TO THE VIETNAM DEVELOPMENT BANK.
AND DEVELOPMENT OF VIETNAM.
1/ Basis for transferring funds:
- Approved economic and technical justification, technical design, and total budget estimate.
- Foreign currency payment schedule consistent with the foreign contracts signed by the project sponsors with suppliers, contractors, surveyors, designers, consultants, etc.
- Capital transfer plan established by the Vietnam Development Bank consistent with the foreign currency payment schedule under the contract.
2/ Transfer of loan funds through the Vietnam Development Bank
- The Ministry of Finance will transfer funds to the Vietnam Development Bank five days before the payment schedule specified in the contract between the project sponsor and the foreign party.
- The Ministry of Finance will transfer funds in installments based on:
+ A request for fund transfer from the Vietnam Development Bank accompanied by the sponsor's payment progress report.
+ Periodic reports on the receipt and use of borrowed funds by the Vietnam Development Bank according to current regulations.
3/ Repayment of funds to the Ministry of Finance.
- The Vietnam Development Bank is responsible for collecting debts from the project sponsors to repay the borrowed funds to the Ministry of Finance. The amount to be repaid includes: principal and foreign interest, and Petechim's borrowing fee.
- The repayment period for the Vietnam Development Bank to the Ministry of Finance shall be consistent with the repayment period of the project sponsors to the Vietnam Development Bank.
- If the project sponsors repay the debt ahead of schedule to the Vietnam Development Bank, the Vietnam Development Bank will immediately repay the debt to the Ministry of Finance.
- Each repayment installment shall not be later than five days after the project sponsors repay the debt to the bank.
III/ THE VIETNAM DEVELOPMENT BANK PROVIDES LOANS TO THE PROJECT SPONSORS.
After consulting the Ministry of Finance and the State Bank of Vietnam on lending and repayment conditions, the Vietnam Development Bank will establish regulations for lending and recovering debts from the project sponsors, ensuring the following principles:
1/ The project sponsors must follow the construction procedures.
2/ The project sponsors must commit to borrowing, repaying the principal and interest on time.
3/ Projects must have an approved investment construction plan by the competent authority.
4/ The temporary borrowing interest rate includes:
- Interest and fees outside the country according to the foreign loan contract at 0.3% per year, including:
+ Borrowing fee paid to Petechim at 0.1% per year
+ Fee for lending by the Vietnam Development Bank at 0.2% per year
The borrowing interest rate may change depending on the interest rate and fees outside the country in specific contracts of Petechim's foreign borrowing. When there is a change, the Ministry of Finance will notify the Vietnam Development Bank and the project sponsors to adjust accordingly.
5/ Repayment period: From the completion date of the project (or project component) and put into production and use, specifically stipulated in the loan agreement between the project sponsor and the Vietnam Development Bank.
6/ Encourage project sponsors to create other legitimate sources of funds to repay the debt ahead of schedule to the bank so that the bank can repay the State Budget earlier.
IV. IMPLEMENTATION.
1/ For the amounts already lent by the Ministry of Finance to the project sponsors up to the implementation of this Circular, they will be handled as follows:
- The Vietnam Development Bank will receive the capital from the Ministry of Finance.
- The project sponsors will receive the debt from the Vietnam Development Bank.
This debt transfer will be recorded in a record signed by all parties: the Ministry of Finance - the Vietnam Development Bank - the project sponsors.
2/ For the need for Vietnamese dong to pay for domestic project expenses, the project sponsors will work with the Vietnam Development Bank to borrow according to the current investment credit regulations.
3/ The competent ministry, the Vietnam Investment and Development Bank shall be responsible for regularly inspecting the implementation progress of investment construction projects, the use of borrowed funds according to their intended purposes, and in accordance with plans.
The Ministry of Finance and the State Bank of Vietnam shall periodically and randomly inspect the use of borrowed funds by the Vietnam Investment and Development Bank and the project investors. In case the Vietnam Investment and Development Bank uses borrowed funds not in compliance with regulations, the Ministry of Finance will take measures to recover the transferred funds or temporarily suspend the transfer of funds for resolution.
4/ Annually, the Vietnam Investment and Development Bank shall be responsible for settling accounts with the Ministry of Finance regarding the amount of funds received, the amount lent out, and the amount of funds repaid (including both principal and interest as stipulated above) for each project until all funds are fully repaid to the Ministry of Finance.
5/ In case the Vietnam Investment and Development Bank fails to repay the state budget the received funds for any reason, the Vietnam Investment and Development Bank must immediately report to the Ministry of Finance, which will then report to the Prime Minister for resolution.
V/ IMPLEMENTATION PROVISIONS.
This Circular takes effect from the date of signature and applies to the Bai Thau Gas Pipeline Project - Thu Duc and the Ba Ria Gas Turbine Project and the 220 kV Ba Ria - Long Binh Transmission Line Project.
During implementation, if there are any difficulties, the project investors, the investment management authorities, and the Vietnam Investment and Development Bank shall promptly reflect them to the Ministry of Finance for unified opinions with relevant state agencies to resolve issues without affecting the construction schedule of the projects.
SIGNATURE OF THE MINISTER OF FINANCE
Deputy Minister
(Nguyen Sinh Nhat Tan)
Pham Van Trong
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